A partnership is formed where a business is started and owned by more than one person.
In each case, a legal document called a Partnership Agreement sets out how the partnership is run, covering areas such as:
How profits are to be shared
What the partners have to invest into the business
How decisions are taken
What happens if a partner wants to leave or dies
The partners between them own all the business assets and owe all business liabilities. Partners, therefore, also have unlimited liability.
However, there is now a fairly new form of partnership in which the partnership is treated as a separate legal entity with its own assets and liabilities. This is known as the limited liability partnership (“LLP”).
Like a company, the LLP is registered at Companies House and must file accounts. The partners continue to control and own the business – but the crucial different is that they are protected by limited liability.
Advantages
Disadvantages
Ordinary partnership
Quite simple – certainly the simplest way for two or more people to form a business together
Minimal paperwork once Partnership agreement set up
Business benefits from the expertise and efforts of more than one owner
Partners can provide specialist skills
reater potential to raise finance – partners each provide the investment
Full personal liability – “unlimited liability”
A poor decision by one partner damages the interests of the other partners
